Key facts
- Manufacturing growth slowed in August, with the S&P Global PMI falling to 51.7.
- The PMI reading, while below July's 51.9, remains above the neutral 50 mark.
- Business confidence reached a six-month high, and job creation was at a two-year peak.
- Smaller firms struggled with declining output and new orders, while larger manufacturers performed better.
- Rising energy costs and geopolitical uncertainty, particularly the Middle East conflict, pose risks to the sector.
Manufacturing growth lost momentum in August, with the S&P Global Purchasing Managers' Index (PMI) dropping to 51.7 from 51.9 in July. Despite the slight decline, the figure remains above the neutral 50 mark, indicating continued expansion in the sector for the tenth consecutive month.
Researchers suggested the slowdown was partly due to a reduced focus on precautionary stock-building as economic uncertainty eases, although clients remain willing to spend with caution. Business confidence improved to a six-month high, and job creation reached its strongest level in two years, offering positive signs for the employment outlook.
However, the performance varied, with smaller manufacturers experiencing a decline in output and new orders, while larger firms fared better. Experts highlighted concerns over rising energy costs and the ongoing conflict in the Middle East as significant sources of uncertainty and potential headwinds for the sector.
Cara Haffey of PwC UK emphasized the importance of sustaining positive results by managing energy costs and capitalizing on improved demand. Matt Swannell of the ITEM Club warned that rising energy prices would increase business costs, predicting a difficult remainder of the year for manufacturing, with the Middle East conflict being a key wildcard.